Friday, May 28, 2010

The Other Happiest Place On Earth

Father, I have sinned.  It's been twenty-five years since I last used an Apple computer.  I confess, I was enticed over to the dark side when all of my clients pursued the Microsoft Borg.

Then, early in May 2010, I was reunited with the Apple world, having consciously skipped a whole generation of technology: no GPS or Kindle, no iPhone or Droid.  When I saw the iPad videos online, integrating all these products into one page-size COLOR screen that could float between portrait and landscape (or lock), I was ready to return to the fold.  The wireless solution appealed to me as much as the ability to zoom in and out of documents. I had searched for a Bluetooth keyboard THAT WORKED for years.

But, I was not prepared for the return to joy that enveloped me at the Apple Store.  First, the place was mobbed each of the three times I went there: evening, daytime and weekend.  It was teeming with people who were having fun experimenting and testing with the wide array of Apple products.  And, to all appearances, the devices seemed to have the industrial strength to survive the use by multiple players with diverse levels of sophistication.  Maybe the store personnel swapped out the used equipment for newer ones each night, but who cares -- the products WORKED so buyers could test drive before making a decision.  When I had tried that at other computer products stores, 90% of the devices would be dead soldiers -- either to protect the products from the people who would actually purchase them or else because the equipment was too fragile to endure real world usage.

My second surprise was that the Apple Store had enough sales personnel to serve this huge volume of business.  The Consumer Medal of Honor goes to the head of Apple's Customer Service who somehow has instilled a genuine client orientation into the hearts and minds of these young adults.  This is why the Apple Store is "the OTHER happiest place on earth!"  Sure, it's easy to have this attitude when you've only sold a million products or two, but these people are serving ten times that many potential customers, across multiple products, and they STILL smile!

I remember this level of enthusiasm from the late 1970's and early 1980's when I first became a computer zealot and there were "user groups" and microcomputer conferences where people could gather to share stories of their small victories along the road to learning this thing.  I remember the graciousness of young aerospace geeks who patiently explained how to set up my disk drives to save data randomly rather than serially on the cassette recorder that came with my Apple II Plus.

My first encounter at the Apple Store was to buy the iPad product from a young enthusiastic female.  My second visit was to attend an overview course where I was joined by about 8 other iPad newbies ranging from young, proficient and savvy to seniors, slower but equally enthusiastic.  How do you accommodate such a widely diverse group of customers in one class? I wondered.  Very well, indeed, it turns out.  As one who is comfortable with technology, I could see the huge span the trainer had to cover.  I watched him call on other sales personnel to quickly set up the iPad of a senior couple, while also answering more sophisticated questions about video and audio downloading from a much more adept former iPhone user.  The technology gap had been breached with ease. 

Afterwards, the trainer lingered to answer remaining questions, including my own query about app development classes.  He did not have the answer, but promised to find out from another more senior associate and locate me later in the store.  "Right," I thought to myself with well-honed skepticism.  "I'll never hear back from him!"  Except, ten minutes later he's showing me websites to follow up on at my leisure, at home, bookmarking them on my new device.  Imagine:  a sales representative who answers your questions AND returns to inform you!

By the time of my third visit to "the OTHER hap pies place on earth," I was beginning to wonder if I wasn't just fascinated by a lon-lost yearning for quality customer service.  But, I needed help setting up the Airport Express WiFi.  I'd made an appointment with the Genius Bar service technician who simply configured the device.  I mean he SIMPLY CONFIGURED a WiFi device!  That is how pleasant an experience it is to work with the iPad.  In contrast, my Windows/Dell combination at home is still giving me set-up messages about the Windows Wireless Zero Configuration Utility that I should discuss with my Network Support Technician, after reading Microsoft's Technical Document #6115228 at  Visions of white-coat -clad computer technicians receiving my Hollerith deck of punched Fortran cards flash back to mind.  These are the same sour memories I have today as I sit and watch a "Loading....." message before granted the opportunity to view an Adobe Flash clip on my desktop browser.  No, I do not miss Flash on my iPad -- not at all.

After almost 25 years watching very little change in functionality under the Windows regime, in spite of hundreds of software updates,  I finally see a quantum shift in end-user features, form and performance with the iPad.  The computer is fun again and the customer is the most important person in this, "the OTHER happiest place on earth."

Wednesday, May 26, 2010

Forty Percent Without Either Law or Quota

Did anyone else besides me notice that the NACD Directorship Magazine (April/May 2010 issue) had a photo of the 20 members of their 2010 Audit Committee Issues Conference spokespersons and that, on pages 38 and 39, there were prominently portrayed 8 women colleagues included because of their incredible experience, competence, and value added to this important group?

Forty percent achieved!. Not one bill had to be passed, not one quota instituted.  Just "outstanding" directors, all!

(Photo used with permission of

Friday, May 21, 2010

The Debate Goes On

On May 20, 2010, the US Senate voted 60 to 40 to end debate on legislation to overhaul and regulate financial markets, then passed the bill on the floor late Thursday night, with a final vote of 59 to 39.. Senate Majority Leader Harry M. Reid, D-NV, led the effort on behalf of Senator Dodd’s bill (S. 3217)

Key elements of the bill:

Consumer Financial Protection Agency within the Federal Reserve.
Regulation of derivatives
Government power to wind down large, failing financial firms

There remains a great deal of debate and deliberation that will occur to resolve issues with the House version during reconciliation stage. A few of the major considerations are these:

1. Exempt some banks and financial entities from provisions/examination by the proposed new consumer protection regulator:

7,500 community banks
dentists and other small (Sen. Olympia Snow, R-ME; Sen. Mary Landau, D-LA)
auto dealers (Sen. Sam Blowback, R-KA; )

2. Require banks to spinoff derivates operations into separate affiliates. (Sen. Blanche Lincoln, D-AR)

3. Require derivatives to be cleared through clearinghouses (Sen. Saxby Chambliss, R-GA)

4. Tougher sanctions for firms that enter into derivatives deals not approved by central clearinghouses and cleared on public exchanges. (Sen. Maria Cantwell, D-WA)

5. Proposal to reinstate the Glass-Steagall law, repealed in 1999, that separated commercial from investment banking. (Sen. Maria Cantwell, D-WA; Sen. John McCain, R-AZ)

6. Proposed “Volker Rule” curbing or banning banks from making speculative investments using their own capital, known as proprietary trading (Sens. Carl M. Levin, D-MI and Jeff Merkley, D-OR)

7. Require banks to spin off hedge funds and private equity fund they own into separate affiliates. (Sens. Carl M. Levin, D-MI and Jeff Merkley, D-OR)

8. Permit small banks to pay less than they had in the past for federal deposit insurance.

9. Allow the Federal Reserve to continue supervising state-chartered banks with < $50B in assets

10. Preserve the ability of community banks to choose which agency will oversee them. (Sen. Ken Bailey Hutchinson, R-TX; Sen. Amy Klobuchan, D-MN; Cambden Fine, CEO of the Independent Community Bankers of America)

11. Create new policies to bar conflicts of interest in the ways securities are packaged and marketed

12. Require banks to maintain higher capital levels and to exclude “trust-preferred securities” from Tier I capital, which measure comparative financial strength. (See endnote on TPS.) (Sen. Susan Collins, R-ME)

13. Require banks to limit the amount of debt they can use in their operations.

14. New restrictions on credit ratings agencies and credit card companies

15. Broadening audits of the Federal Reserve by the GAO

16. Breaking up the largest financial conglomerates (Sen. Maria Cantwell, D-WA)

17. Reform of Fannie Mae and Freddie Mac – not really included, yet (Sen Richard Shelby, R-AL)

A note on “trust-preferred securities”:

Trust-preferred securities (TPS) are hybrid financial instruments that are debt with equity-like traits: long maturities of 30 to 60 years; coupons that can be delayed. Approximately 1500 banks issued TPS between 2000 and 2008 after the Fed ruled in 1996 that they could be included in Tier I capital calculations (making balance sheets look stronger than they were). Wall Street brokerages bought the TPS from individual banks that had issued them; then packaged them into CDOs; sold slices of the CDOs to other smaller banks. Community banks, regulated by the FDIC, bought $12 B worth of TPS over the 8 year period. Now the FDIC holds about 250 CDOs (book value of $400 M) that it inherited by taking over failed banks.  In some cases, the FDIC is substituting itself for failed banks named in lawsuits involving TPS/CDOs.

Thursday, May 20, 2010

Proposed Consumer Financial Protection Legislation

Are we all clear about what’s being proposed by the legislation on financial reform?

The OMNIBUS Senator Dodd bill covers 13 sections, although some logically could be aggregated together. See: (March 16, 2010)

Senator Dodd’s bill covers the following subjects:

1.         Consumer Financial Protection Bureau
2.         Financial Stability Oversight Council
3.         Big Bankruptcies
4.         Clarifying Bank Regulation
5.         Derivatives
6.         Hedge Funds
7.         Insurance
8.         Credit Ratings Agencies
9.         Executive Compensation and Corporate Governance
10.       Enhanced Investor Protections
11.       Securitization
12.       Municipal Securities
13.       Federal Reserve System

FDIC Chair, Sheila Bair Speech: “the FDIC supervises almost 5,000 banks – mostly community banks” (March 19, 2010), warned about “Senate draft which seem to allow the potential for backdoor bailouts through the Federal Reserve Board's 13(3) authority.”

Dodd’s Senate Bill, Title X, proposes a Consumer Financial Protection Bureau within the Federal Reserve led by a director to be appointed by the President for 5 years; director shall appoint a deputy director

6 members to the Consumer Advisory Board to be appointed by the Federal Reserve Bank Presidents; actions could be set aside by the Systemic Risk Council

authority over insured depository institutions and credit unions with more than $10 billion in assets and their service providers

Interim Secretary of the Treasury is given the authority to perform the functions of the Bureau until the Director of the Bureau is confirmed by the Senate

Barney Franks’ House Financial Services legislation: passed by the House as HR 4173 – Wall Street Reform and Consumer Protection Act of 2009

1.         Financial Stability Improvement Act
2          Corporate and Financial Institution Compensation Fairness Act
3.         Over-the-Counter Derivatives Markets Act
4.         Consumer Financial Protection Agency Act
5.         Capital Markets
6.         Federal Insurance Office

House version of the Consumer Financial Protection Agency (CFPA)

Exempts banks and thrifts under $10 billion in assets and credit unions under $1.5 billion in assets by keeping their existing regulatory oversight in place; reverses the broad authority of the Comptroller of the Currency to exempt federally chartered banks from state consumer protection laws.

Empowers state attorneys general and bank supervisors to enforce state laws against banks and thrifts when they violate CFPA regulations and their own state consumer protection laws

Exempts merchants, retailers and other nonfinancial businesses who extend credit directly to consumers and doctors and other businesses that bill customers after providing services.

Extracts "consumer protection" provisions from the following legislation:

(A) The Alternative Mortgage Transaction Parity Act (12 U.S.C. 3801 et seq.).
(B) The Electronic Funds Transfer Act (15 U.S.C. 1693 et seq.).
(C) The Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.).
(D) The Fair Credit Reporting Act (15 U.S.C. 1681 et seq.), except with respect to sections 615(e) and 628 of such Act.
(E) The Fair Debt Collection Practices Act (15 U.S.C. 1692 et seq.).
(F) Subsections (b), (c), (d), (e), and (f) of section 43 of the Federal Deposit Insurance Act
(12 U.S.C. 1831t).
(G) Sections 502, 503, 504, 505, 506, 507, 508, and 509 of the Gramm-Leach-Bliley Act (15 U.S.C. 6802 et seq.) except for section 505 as it applies to section 501(b).
(H) The Homeowners Protection Act of 1998.
(I) The Home Mortgage Disclosure Act (12 U.S.C. 2801 et seq.).
(J) The Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.).
(K) The Secure and Fair Enforcement for Mortgage Licensing Act (12 U.S.C. 5101 et
(L) The Truth in Lending Act (15 U.S.C.1601 et seq.).
(M) The Truth in Savings Act (12 U.S.C 4301 et seq.).
(N) Section 626 of the Omnibus Appropriations Act, 2009 (Public Law 1118).
(O) The Unlawful Internet Gambling Enforcement Act of 2006.

A 2 year transition from an Agency to a Commission.

Establishes an Independent Consumer Financial Protection Agency led by a Director appointed by the President with the advice and consent of the Senate

5 members who shall be appointed by the President, by and with the advice and consent of the Senate, shall serve 5 year terms, staggered at 1, 2, 4, and 5 years; not more than 3 of one political party

Consumer Financial Protection Oversight Board to advise the Director; board to consist of 7 members:

(1) The Chairman of the Board of Governors of the Federal Reserve
(2) The head of the agency responsible for chartering and regulating national banks.
(3) The Chairperson of the Federal Deposit Insurance Corporation.
(4) The Chairman of the National Credit Union Administration.
(5) The Chairman of the Federal Trade Commission.
(6) The Secretary of Housing and Urban Development.
(7) The Chairman of the liaison committee of representatives of State agencies to the Financial Institutions Examination Council.

5 additional members of the Board to be named from among experts in the fields of consumer protection, fair lending and civil rights, representatives of depository institutions that primarily serve underserved communities, or representatives of communities that have been significantly impacted by higher-priced mortgage loans, as such communities are identified by the Director through an analysis of data received by reason of the provisions of the Home Mortgage Disclosure Act of 1975 or other data on lending patterns.

Principal offices
Community Affairs
Consumer Complaints
Consumer Financial Education
Single consumer complaint hotline
Older American Financial Protection Office
            Including a National Education and Resource Center on Women and Retirement Planning
Fair Lending and Equal Opportunity Office

Coordinate with other Federal and State agencies and:
            Securities and Exchange Commission, the Commodity Futures Trading Commission, the Secretary of the Treasury, the Federal Trade Commission, and other Federal agencies and State regulators

Financial Literacy and Education Commission established by the Financial Literacy and Education Improvement Act (20 U.S.C. 9701 et seq.) –

Funded by transfer of 10% of the Federal Reserve Systems total system expenses
Director may assess fees on covered persons to meet Agency’s expenses based on the size, complexity of, risk posed by, and the compliance record of the covered person

$200,000,000 authorized appropriation for each year 2010 – 2014

Creation in Treasury of a CFPA Depository Institution Fund; a CFPA Nondepository Institution Fund; and a Consumer Financial Protection Agency Civil Penalty Fund

Transfers all consumer financial protection functions from:
  • Board of Governors of the Federal Reserve, except the Consumer Advisory Council established by the Board of Governors pursuant to section 703(b) of Public Law 90321 (15 U.S.C. 1691b(b)) shall continue as an entity within the Federal Reserve System
  • Comptroller of the Currency
  • Director of the Office of Thrift Supervision
  • Federal Deposit Insurance Corporation
  • Federal Trade Commission
  • National Credit Union Administration
  • Secretary of Housing and Urban Development relating to the Real Estate Settlement Procedures Act of 1974 and the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, but excluding the Community Reinvestment Act of 1977.
Includes transfer of employees from the above, with a 5 year guarantee of employment.

Financial institution shall maintain records of the number and dollar amounts of deposit accounts of customers, geo-coded by Census tract.

Applications for small business loans shall specify whether for women-/minority-owned businesses.

Annual autopsy - sampling of foreclosures and bankruptcies during the previous calendar year in each State or territory of the United States.